Security News > 2023 > October > SBF on trial: The Python code that allegedly let Alameda hedge fund spend people's FTX deposits

At the fraud trial of former FTX head Sam Bankman-Fried, prosecutors presented the jury with Python code for the FTX backend that allowed flagged client accounts to spend money they didn't have on the cryptocurrency exchange.

Multiple accounts associated with Alameda Research, the hedge fund controlled by Bankman-Fried that allegedly used billions of dollars of customer deposits in FTX as a slush fund, were flagged thus, according to reported accounts of the testimony of FTX co-founder Gary Wang.

This contradicts Bankman-Fried's July 31, 2019 statement that Alameda and its accounts were treated the same as any other customer on FTX. That is to say, Alameda Research, which bankrolled startups and other ventures, had a normal account on FTX, according to SBF, but it's now alleged the hedge fund was able to spend as it wanted, with the funds coming from a pool of customer assets.

Wang, who has already pleaded guilty to four charges, reportedly said that the code let Alameda Research's accounts on FTX avoid overdraft checks, demonstrating the cryptocurrency investment biz was not treated the same as other customers.

This is essentially the alleged backdoor in FTX that allowed Alameda Research to obtain $65 billion in credit and to wind up with $8 billion in liability upon bankruptcy.

On Tuesday, Caroline Ellison, former CEO of Alameda Research and Bankman-Fried's former romantic partner, testified that Bankman-Fried had told her to take about $10 billion in customer funds from FTX to repay loans made to Alameda.

News URL

https://go.theregister.com/feed/www.theregister.com/2023/10/10/ftx_python_code/